Table 6-14, found on the textbook's Web site, gives quarterly data on real personal expenditure (PCE), real expenditure on durable goods (EXPDUR), real expenditure on nondurable goods (EXPNONDUR), and real expenditure on services (EXPSER), for the United States for the period 2000-1 to 2008-3. All data are in billions of (2000) dollars, and the quarterly data are at seasonally adjusted annual rates.
a. Plot the data on EXPDUR, EXPNONDUR, and EXPSER against PCE.
b. Suppose you regress each category of expenditure on PCE and the three dummies shown in Table 6-14. Would you expect the dummy variable coefficients to be statistically significant? Why or why not? Present your calculations.
c. If you do not expect the dummy variables to be statistically significant but you still include them in your model, what are the consequences of your action?